Telangana High Court Upholds Anti-Profiteering Ruling: Cinema Theatre Found in Violation

By: Admin
September 13, 2024
Categories: Tax News | 4 Min Read

In a significant legal development, the Telangana High Court has upheld the National Anti-Profiteering Authority’s (NAPA) decision in the case of Sudarshan Theatre v. Union of India [June 21, 2024]. The court ruled that the theatre violated Section 171 of the Central Goods and Services Tax (CGST) Act, 2017, by failing to reduce cinema ticket prices promptly after a GST rate cut.

Previously, Sudarshan Theatre charged a GST of 28% on tickets priced above Rs. 100 and 18% on those below Rs. 100. Following a GST rate reduction on January 1, 2019—reducing rates to 18% and 12%, respectively—the theatre delayed implementing price reductions until March 2019. Although the theatre paid GST at the new, lower rates, they did not pass on the benefits to consumers during this interim period, leading to allegations of profiteering.

The court affirmed that Section 171(1) of the CGST Act requires any reduction in tax rates to be immediately reflected in the prices charged to consumers. The theatre’s failure to adjust prices in line with the GST rate reduction constituted a clear violation of this provision. The ruling underscores that the law does not permit exceptions to this requirement.

This decision underscores the importance of compliance with anti-profiteering regulations under GST, ensuring that tax reductions are directly passed on to consumers. Businesses that fail to adhere to these provisions may face penalties from the National Anti-Profiteering Authority.

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